2017-08-24 19:00:14 CEST
2017-08-24 19:00:14 CEST
Lemminkäinen - Prospectus/Announcement of Prospectus
The Finn-FSA has approved Lemminkäinen’s and YIT’s Merger Prospectus and granted exemption from the obligation to publish listing prospectus
LEMMINKÄINEN CORPORATION STOCK EXCHANGE RELEASE 24 AUGUST 2017 AT 8 P.M.
This stock exchange release may not be published or distributed, in whole or in
part, directly or indirectly, in or into Canada, Australia, Hong Kong, South
Africa, Japan or any other country where such publication or distribution would
violate applicable laws or rules or would require additional documents to be
completed or registered or require any measure to be undertaken, in addition to
the requirements under Finnish law. For further information see "Important
notice" below.
THE FINN-FSA HAS APPROVED LEMMINKÄINEN’S AND YIT’S MERGER PROSPECTUS AND GRANTED
EXEMPTION FROM THE OBLIGATION TO PUBLISH LISTING PROSPECTUS
Lemminkäinen Corporation (“Lemminkäinen”) and YIT Corporation (“YIT”) announced
on 19 June 2017, that the companies' Boards of Directors have agreed upon the
combination of the two companies through a statutory absorption merger pursuant
to the Finnish Companies Act whereby Lemminkäinen will be merged into YIT in
such a manner that all assets and liabilities of Lemminkäinen would be
transferred without a liquidation procedure to YIT (the “Merger”). The
shareholders of Lemminkäinen would receive as merger consideration 3.6146 new
shares of YIT (the “Merger Consideration Shares”) for each share owned by them
in Lemminkäinen. In addition, the Boards of Directors of Lemminkäinen and YIT
proposed on 27 July 2017 that the Extraordinary General Meetings of Lemminkäinen
and YIT, both convened to be held on 12 September 2017, resolve upon the Merger
as set forth in the merger plan.
The Finnish Financial Supervisory Authority has today, 24 August 2017, approved
the Finnish language Merger Prospectus, which has been prepared in order to
issue Merger Consideration Shares to the shareholders of Lemminkäinen (the
“Merger Prospectus”). The Finnish language Merger Prospectus and the English
language offering circular are available as of 25 August 2017 at
www.lemminkainen.com/merger and at https://www.yitgroup.com/en/investors/merger.
In addition, the Finnish language Merger Prospectus and the English language
offering circular are available approximately on 28 August 2017 as printed
copies at the offices of Lemminkäinen at Salmisaarenaukio 2, FI-00180 Helsinki,
Finland, at the offices of YIT at Panuntie 11, FI-00620 Helsinki, Finland and at
the reception of the Helsinki Stock Exchange at Fabianinkatu 14, FI-00100
Helsinki, Finland.
The Merger Prospectus contains the following previously unpublished information
in relation to the Merger and YIT (any capitalized terms used in the annexes and
not defined therein shall have the meanings assigned to them in the Merger
Prospectus):
- Unaudited pro forma financial information
The unaudited pro forma financial information included in the Merger Prospectus
is attached as Annex 1 to this stock exchange release
- Additional details on financing of the combined company
Additional details on the new financing arrangements in connection with the
Merger and certain other financial arrangements included in the Merger
Prospectus are attached as Annex 2 to this stock exchange release.
The Finnish Financial Supervisory Authority has today, 24 August 2017, granted
an exemption to YIT from the obligation to publish listing prospectus in order
to list the Merger Consideration Shares on the official list of Nasdaq Helsinki
in connection with the execution of the Merger. The exemption requires that YIT
will keep available to the public, together with the Merger Prospectus approved
on 24 August 2017, all such decisions and factors relating to business
operations disclosed by YIT and Lemminkäinen following the publication of the
Merger Prospectus that may have a material effect on the value of the securities
of YIT or Lemminkäinen.
LEMMINKÄINEN CORPORATION
Corporate Communications
ADDITIONAL INFORMATION:
Ilkka Salonen, CFO
Tel. +358 2071 53378
Ilkka.salonen@lemminkainen.com
DISTRIBUTION:
Nasdaq Helsinki Ltd.
Key media
www.lemminkainen.com
Lemminkäinen and YIT in brief
Lemminkäinen is an expert in complex infrastructure construction and building
construction in Northern Europe and one of the largest paving companies in its
market. Together with our customers and the 4,700 professionals we employ, we
build a sustainable society. In 2016, our net sales were EUR 1.7 billion.
Lemminkäinen Corporation’s share is quoted on Nasdaq Helsinki Ltd.
www.lemminkainen.com
‘YIT creates better living environment by developing and constructing housing,
business premises, infrastructure and entire areas. Our vision is to bring more
life in sustainable cities. We want to focus on caring for customer, visionary
urban development, passionate execution and inspiring leadership. Our growth
engine is urban development involving partners. Our operating area covers
Finland, Russia, the Baltic countries, the Czech Republic, Slovakia and Poland.
In 2016, our revenue amounted to nearly EUR 1.7 billion, and we employ about
5,300 employees. Our share is listed on Nasdaq Helsinki. www.yitgroup.com
IMPORTANT NOTICE
The distribution of this release may be restricted by law and persons into whose
possession any document or other information referred to herein comes should
inform themselves about and observe any such restrictions. The information
contained herein is not for publication or distribution, directly or indirectly,
in or into Canada, Australia, Hong Kong, South Africa or Japan. Any failure to
comply with these restrictions may constitute a violation of the securities laws
of any such jurisdiction. This release is not directed to, and is not intended
for distribution to or use by, any person or entity that is a citizen or
resident or located in any locality, state, country or other jurisdiction where
such distribution, publication, availability or use would be contrary to law or
regulation or which would require any registration or licensing within such
jurisdiction.
This release does not constitute a notice to an EGM or a Merger Prospectus and
as such, does not constitute or form part of and should not be construed as, an
offer to sell, or the solicitation or invitation of any offer to buy, acquire or
subscribe for, any securities or an inducement to enter into investment
activity. Any decision with respect to the proposed statutory absorption Merger
of Lemminkäinen into YIT should be made solely on the basis of information that
will be contained in the actual notices to the EGM of YIT and Lemminkäinen, as
applicable, and the Merger Prospectus related to the Merger as well as on an
independent analysis of the information contained therein. You should consult
the Merger Prospectus for more complete information about YIT, Lemminkäinen,
their respective subsidiaries, their respective securities and the Merger.
No part of this release, nor the fact of its distribution, should form the basis
of, or be relied on in connection with, any contract or commitment or investment
decision whatsoever. The information contained in this release has not been
independently verified. No representation, warranty or undertaking, expressed or
implied, is made as to, and no reliance should be placed on, the fairness,
accuracy, completeness or correctness of the information or the opinions
contained herein. Neither YIT nor Lemminkäinen, nor any of their respective
affiliates, advisors or representatives or any other person, shall have any
liability whatsoever (in negligence or otherwise) for any loss however arising
from any use of this release or its contents or otherwise arising in connection
with this release. Each person must rely on their own examination and analysis
of YIT, Lemminkäinen, their respective subsidiaries, their respective securities
and the Merger, including the merits and risks involved.
This release includes ”forward-looking statements”. These statements may not be
based on historical facts, but are statements about future expectations. When
used in this release, the words ”aims, ” ”anticipates, ” ”assumes, ” ”believes,
” ”could, ” ”estimates, ” ”expects, ” ”intends, ” ”may, ” ”plans, ” ”should, ”
”will, ” ”would” and similar expressions as they relate to YIT, Lemminkäinen,
the Merger or the combination of the business operations of YIT and Lemminkäinen
identify certain of these forward-looking statements. Other forward-looking
statements can be identified in the context in which the statements are made.
Forward-looking statements are set forth in a number of places in this release,
including wherever this release include information on the future results, plans
and expectations with regard to the combined company's business, including its
strategic plans and plans on growth and profitability, and the general economic
conditions. These forward-looking statements are based on present plans,
estimates, projections and expectations and are not guarantees of future
performance. They are based on certain expectations, which, even though they
seem to be reasonable at present, may turn out to be incorrect. Such forward
-looking statements are based on assumptions and are subject to various risks
and uncertainties. Shareholders should not rely on these forward-looking
statements. Numerous factors may cause the actual results of operations or
financial condition of the combined company to differ materially from those
expressed or implied in the forward-looking statements. Neither YIT nor
Lemminkäinen, nor any of their respective affiliates, advisors or
representatives or any other person undertakes any obligation to review or
confirm or to release publicly any revisions to any forward-looking statements
to reflect events that occur or circumstances that arise after the date of this
release.
This release includes estimates relating to the synergy benefits expected to
arise from the Merger and the combination of the business operations of YIT and
Lemminkäinen as well as the related integration costs, which have been prepared
by YIT and Lemminkäinen and are based on a number of assumptions and judgments.
Such estimates present the expected future impact of the Merger and the
combination of the business operations of YIT and Lemminkäinen on the combined
company's business, financial condition and results of operations. The
assumptions relating to the estimated synergy benefits and related integration
costs are inherently uncertain and are subject to a wide variety of significant
business, economic, and competitive risks and uncertainties that could cause the
actual cost synergy benefits from the Merger and the combination of the business
operations of YIT and Lemminkäinen, if any, and related integration costs to
differ materially from the estimates in this release. Further, there can be no
certainty that the Merger will be completed in the manner and timeframe
described in this release, or at all.
Notice to Lemminkäinen Shareholders in the United States
The YIT shares to be issued in connection with the Merger have not been
registered under the U.S. Securities Act of 1933, as amended (the “Securities
Act”) and are being issued in reliance on the exemption from registration set
forth in Rule 802 under the Securities Act.
YIT and Lemminkäinen are Finnish companies and the issuance of YIT shares will
be subject to procedural and disclosure requirements in Finland that may be
different from those of the United States. Any financial statements or other
financial information included in this release may have been prepared in
accordance with non-U.S. accounting standards that may not be comparable to the
financial statements of U.S. companies or companies whose financial statements
are prepared in accordance with generally accepted accounting principles in the
United States.
It may be difficult for U.S. shareholders of Lemminkäinen to enforce their
rights and any claims they may have arising under U.S. federal securities laws
in connection with the Merger, since YIT and Lemminkäinen are located in non
-U.S. jurisdictions, and some or all of YIT's and Lemminkäinen's officers and
directors may be residents of countries other than the United States. As a
result, U.S. shareholders of Lemminkäinen may not be able to sue YIT or
Lemminkäinen or their respective officers and directors in a court in Finland
for violations of U.S. federal securities laws. Further, it may be difficult to
compel YIT or Lemminkäinen to subject themselves to the jurisdiction or judgment
of a U.S. court.
Lemminkäinen’s shareholders should be aware that YIT may purchase Lemminkäinen’s
shares otherwise than under the Merger, such as in open market or privately
negotiated purchases, at any time during the pendency of the proposed merger.
Notice to Shareholders in the United Kingdom
This release, the Merger Prospectus and the English language offering circular
(“Offering Circular”) are for distribution only to persons who (i) have
professional experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii) are
persons falling within Article 43 of the Financial Promotion Order (for example
as shareholders in Lemminkäinen entitled to receive the Merger Consideration
Shares pursuant to the Finnish Companies Act (21.7.2006/624, as amended)), (iii)
are persons falling within Article 49(2)(a) to (d) ("high net worth companies,
unincorporated associations etc.") of the Financial Promotion Order, (iv) are
outside the United Kingdom, or (v) are persons to whom an invitation or
inducement to engage in investment activity (within the meaning of section 21 of
the Financial Services and Markets Act 2000) in connection with the issue or
sale of the Merger Consideration Shares may otherwise lawfully be communicated
or caused to be communicated (all such persons together being referred to as
"relevant persons"). The release, the Merger Prospectus and the Offering
Circular are directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment
activity to which these documents relate, are available only to relevant persons
and will be engaged in only with relevant persons.
Notice to Shareholders in the European Economic Area
The Offering Circular has been prepared on the basis that any offer of the
merger consideration shares in any Member State of the European Economic Area
(“EEA”) other than offers (the “Permitted Public Offers”) which are made prior
to the Effective Date (as defined in the Offering Circular), and which are
contemplated in the Offering Circular in Finland once the Finnish language
Merger Prospectus has been approved by the competent authority in Finland and
published in accordance with the Prospectus Directive, and in respect of which
YIT has consented in writing to the use of the Offering Circular, will be made
pursuant to an exemption under the Prospectus Directive from the requirement to
publish a prospectus for offers of the merger consideration shares. Accordingly
any person making or intending to make an offer in that Member State of the
merger consideration shares which are the subject of the offer contemplated in
the Offering Circular, other than the Permitted Public Offers, may only do so in
circumstances in which no obligation arises for YIT to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus
pursuant to Article 16 of the Prospectus Directive, in each case, in relation to
such offer. YIT has not authorised, nor does it authorise, the making of any
offer (other than Permitted Public Offers) of the merger consideration shares in
circumstances in which an obligation arises for YIT to publish or supplement a
prospectus for such offer.
In relation to each Member State of the EEA, with effect from and including the
date on which the Prospectus Directive was implemented in that Member State (the
“Relevant Implementation Date”) no offer has been made and will not be made
(other than a Permitted Public Offer) of the merger consideration shares which
are the subject of the offering contemplated by the Offering Circular to the
public in that Member State, except that, with effect from and including the
Relevant Implementation Date, an offer of such merger consideration shares is
made to the public in that Member State:
a) to any legal entity which is a qualified investor as defined in the
Prospectus Directive;
b) to fewer than 150 natural or legal persons (other than qualified investors
as defined in the Prospectus Directive), as permitted under the Prospectus
Directive, subject to obtaining the prior consent of YIT for any such offer; or
c) in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
provided that no offer of the merger consideration shares is made which would
require YIT to publish a prospectus pursuant to Article 3 of the Prospectus
Directive or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive.
The expression an offer of the merger consideration shares to the public in
relation to any merger consideration shares in any Member State means the
communication in any form and by any means of sufficient information on the
terms of the offer and the merger consideration shares to be offered so as to
enable an investor to decide to purchase or subscribe to the merger
consideration shares, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State.
The expression “Prospectus Directive” means Directive 2003/71/EC (as amended),
and includes any relevant implementing measure in the EEA Member State
concerned.
ANNEX 1: Unaudited pro forma financial information
The following unaudited pro forma combined financial information (the “Unaudited
Pro Forma Financial Information”) is presented for illustrative purposes only to
give effect to the merger of YIT and Lemminkäinen. The Unaudited Pro Forma
Financial Information is prepared based on the historical financial information
of YIT and Lemminkäinen presented in accordance with IFRS. For additional
information on the historical results and financial position of YIT or
Lemminkäinen, refer to the audited historical consolidated financial information
and the unaudited half-year financial reports of YIT and Lemminkäinen
incorporated by reference into the Offering Circular.
Merger of YIT and Lemminkäinen
The Boards of Directors of YIT and Lemminkäinen have, on July 27, 2017, proposed
that the Extraordinary General Meetings of YIT and Lemminkäinen, both convened
to be held on September 12, 2017, would resolve on the Merger as set forth in
the Merger Plan. The completion of the Merger is subject to, inter alia,
approval by the Extraordinary General Meetings of YIT and Lemminkäinen, merger
control approvals by the relevant competition authorities, fulfilment of other
conditions to completion set forth in the Combination Agreement and the Merger
Plan, or to the extent permitted by applicable law, waiver of such conditions.
Furthermore, it is required for the completion of the Merger that the
Combination Agreement has not been terminated in accordance with its provisions,
and that the execution of the Merger is registered with the Trade Register.
Lemminkäinen will automatically dissolve on the Effective Date.
In connection with the proposed merger, YIT has received a financing commitment
for the Merger from Nordea and Danske Bank.
The execution of the Merger is intended to be registered with the Trade Register
on or about November 1, 2017, or on January 1, 2018, at latest, as possible
(i.e. on the Effective Date), provided that the conditions for the completion of
the Merger have been fulfilled or duly waived.
Basis of presentation
The Merger will be accounted for as a business combination at consolidation
using the acquisition method of accounting under the provisions of IFRS 3,
Business Combinations (“IFRS 3”) with YIT determined as the acquirer of
Lemminkäinen. The acquisition method of accounting applies the fair value
concepts defined in IFRS 13, Fair Value Measurement (“IFRS 13”), and requires,
among other things, that the identifiable assets acquired and liabilities
assumed in a business combination are recognised at their fair values as of the
acquisition date, with any excess of the purchase consideration over the fair
value of identifiable net assets acquired recognised as goodwill. The purchase
price calculation presented herein has been made solely for the purpose of
preparing this Unaudited Pro Forma Financial Information. The Unaudited Pro
Forma Financial Information has been prepared in accordance with the Annex II to
the Commission Regulation (EU) No 809/2004, as amended and on a basis consistent
with the accounting principles applied by YIT in its consolidated financial
statements. The Unaudited Pro Forma Financial Information has not been compiled
in accordance with Article 11 of Regulation S-X under the Securities Act or the
guidelines established by the American Institute of Certified Public
Accountants.
The Unaudited Pro Forma Financial Information is derived from (a) the audited
consolidated financial statements of YIT for the year ended December 31, 2016
(b) the unaudited half-year financial report of YIT as at and for the six months
ended June 30, 2017 (c) the audited consolidated financial statements of
Lemminkäinen for the year ended December 31, 2016 and (d) the unaudited half
-year financial report of Lemminkäinen as at and for the six months ended June
30, 2017. In the following tables this information is labelled as “historical”.
The unaudited pro forma combined statement of financial position as at June 30,
2017 gives effect to the Merger as if it had occurred on that date. The
unaudited pro forma combined statements of income for the six months ended June
30, 2017 and for the year ended December 31, 2016 give effect to the Merger as
if it had occurred on January 1, 2016.
The Unaudited Pro Forma Financial Information reflects adjustments to historical
financial information to give pro forma effect to events that are directly
attributable to the Merger and which are factually supportable. The Unaudited
Pro Forma Financial Information and explanatory notes present how YIT’s
statements of income and statement of financial position may have appeared had
the businesses actually been combined and had YIT’s capital structure reflected
the Merger as of the dates noted above.
YIT has performed a preliminary alignment of Lemminkäinen’s accounting policies
to ensure comparability in the Unaudited Pro Forma Financial Information. Based
on the information available at this time, YIT is not aware of any accounting
policy differences that could have a material impact on the Unaudited Pro Forma
Financial Information. However, certain reclassifications have been made to
amounts reflected in Lemminkäinen’s historical financial information to align
with YIT’s presentation as described further in Note 1 to the Unaudited Pro
Forma Financial Information. Upon the completion of the Merger, YIT will conduct
a detailed review of Lemminkäinen’s accounting policies and estimates applied.
As a result of that review, YIT may identify additional accounting policy
differences between the two companies that, when conformed, could have further
impact on the Combined Company’s financial information. Also, the accounting
policies to be applied by the Combined Company in the future may differ from the
accounting policies applied in the Unaudited Pro Forma Financial Information.
The Unaudited Pro Forma Financial Information reflects the application of pro
forma adjustments that are preliminary and which are based upon available
information and certain assumptions, described in the accompanying notes to the
Unaudited Pro Forma Financial Information below and, that management believes
are reasonable under the circumstances. Actual results of the Merger may
materially differ from the assumptions used in the Unaudited Pro Forma Financial
Information. The Unaudited Pro Forma Financial Information has been prepared by
management for illustrative purposes only and, because of its nature, it
addresses a hypothetical situation, and therefore does not represent the actual
financial position or results of the YIT’s operations that would have been
realised had the Merger occurred as of the dates indicated, nor is it meant to
be indicative of any anticipated financial position or future results of
operations that YIT may experience going forward. In addition, the accompanying
unaudited pro forma combined statement of income do not reflect any expected
cost savings, synergy benefits or future integration costs that are expected to
be generated or may be incurred as a result of the Merger.
All amounts presented are in millions of euros unless otherwise noted. The
Unaudited Pro Forma Financial Information set forth herein has been rounded.
Accordingly, in certain instances, the sum of the numbers in a column or row may
not conform exactly to the total amount given for that column or row.
Unaudited Pro Forma Combined Statement of Financial Position as at June 30, 2017
(EUR in millions) YIT Lemminkäinen Merger Combined
historical historical (Note Company
2) pro
forma
Assets
Non-current assets
Property, plant and equipment 55.0 139.1 18.8 212.9
Goodwill 8.1 53.2 327.9 389.2
Other intangible assets 12.3 8.5 51.1 71.9
Investments in associated 81.9 4.1 - 86.0
companies and joint ventures
Available-for-sale financial 0.4 1.9 - 2.3
assets
Interests-bearing receivables 39.9 - - 39.9
Other receivables 2.6 0.9 1.1 4.5
Deferred tax assets 52.8 33.5 -24.3 62.0
Total non-current assets 253.1 241.2 374.5 868.7
Current assets
Inventories 1,701.9 392.1 29.3 2,123.2
Trade and other receivables 219.0 327.5 -1.9 544.5
Income tax receivables 5.3 1.1 - 6.4
Cash and cash equivalents 35.3 56.2 -14.5 77.1
Total current assets 1,961.5 776.9 12.9 2,751.3
Total assets 2,214.5 1,018.0 387.5 3,620.0
Equity and liabilities
Total equity attributable to the 533.4 294.3 294.9 1,122.6
equity holders of the parent
company
Non-controlling interest - 0.0 - 0.0
Total equity 533.4 294.3 294.9 1,122.6
Non-current liabilities
Deferred tax liabilities 14.4 9.8 10.8 35.0
Pension obligations 2.1 - - 2.1
Provisions 46.6 19.9 33.3 99.9
Borrowings 268.5 119.2 7.5 395.2
Other liabilities 53.2 0.1 - 53.3
Total non-current liabilities 384.8 149.0 51.6 585.4
Current liabilities
Advances received 476.5 170.0 - 646.4
Trade and other payables 402.8 297.7 3.3 703.8
Income tax liabilities 6.1 1.3 - 7.4
Provisions 31.0 11.9 - 42.9
Borrowings 380.0 93.8 37.7 511.5
Total current liabilities 1,296.4 574.7 41.0 1,912.0
Total liabilities 1,681.2 723.7 92.6 2,497.4
Total equity and liabilities 2,214.5 1,018.0 387.5 3,620.0
Refer to accompanying notes to Unaudited Pro Forma Financial Information
Unaudited Pro Forma Combined Statement of Income for the six months ended June
30, 2017
(EUR in millions, YIT Lemminkäinen Merger Note Combined
unless otherwise historical reclassified (Note Company pro
indicated) (Note 1) 2) forma
Revenue 961.2 720.5 -2.3 2a 1,679.4
Other operating 5.0 4.7 - 9.7
income
Change in inventories -0.1 17.2 - 17.2
of finished goods and
work in progress
Production for own 0.4 0.2 - 0.6
use
Materials and -158.1 -194.1 -5.0 2a -357.2
supplies
External services -488.2 -332.8 - -821.0
Personnel expenses -140.1 -139.3 0.3 2a -279.1
Other operating -147.1 -80.4 2.9 2b -224.7
expenses
Share of results in -0.2 -0.7 - -0.9
associated companies
and joint ventures
Depreciation, -6.9 -12.8 -6.0 2a -25.8
amortisation and
impairment
Operating profit 25.8 -17.4 -10.2 -1.8
Financial income and -6.7 -7.9 2.1 2c -12.5
expenses, total
Result before taxes 19.2 -25.4 -8.1 -14.3
Income taxes -4.4 4.4 1.7 1.7
Result for the 14.8 -21.0 -6.5 -12.6
period
Attributable to
Equity holders of the 14.8 -21.0 -6.5 -12.6
parent company
Non-controlling - 0.0 - 0.0
interest
Earnings per share
for profit
attributable
to the equity holders
of the parent
company
Basic, EUR 0.12 -0.06
Diluted, EUR 0.12 -0.06
Weighted average
number of shares
outstanding
Basic, thousand 125,643 209,519
shares
Diluted, thousand 127,549 211,903
shares
Refer to accompanying notes to Unaudited Pro Forma Financial Information
Unaudited Pro Forma Combined Statement of Income for the year ended December 31,
2016
(EUR in YIT Lemminkäinen Merger Note Combined
millions, historical(audited) reclassified (Note Company
unless (Note 1) 2) pro
otherwise forma
indicated)
Revenue 1,678.3 1,719.7 -11.0 2a 3,387.0
Other 12.8 43.6 - 56.5
operating
income
Change in 13.0 -31.2 - -18.3
inventories
of finished
goods and
work in
progress
Production 0.3 0.1 - 0.4
for own
use
Materials and -245.2 -426.2 -3.6 2a -675.0
supplies
External -892.4 -732.8 - -1,625.1
services
Personnel -250.3 -303.1 -0.0 2a -553.4
expenses
Other -281.7 -170.9 -12.0 2b -464.6
operating
expenses
Share of -0.6 1.5 - 0.8
results in
associated
companies
and joint
ventures
Depreciation, -16.5 -34.5 -12.1 2a -63.1
amortisation
and
impairment
Operating 17.7 66.3 -38.7 45.3
profit
Financial -20.1 -17.0 2.9 2c -34.3
income and
expenses,
total
Result before -2.5 49.2 -35.9 11.0
taxes
Income taxes -4.7 -11.2 7.3 -8.6
Result for -7.1 38.0 -28.6 2.4
the
period
Attributable
to
Equity -7.1 38.0 -28.6 2.4
holders of
the
parent
company
Non - 0.0 - 0.0
-controlling
interest
Earnings per
share
for profit
attributable
to the equity
holders
of the parent
company
Basic, EUR -0.06 0.01
Diluted, EUR -0.06 0.01
Weighted
average
number of
shares
outstanding
Basic, 125,577 209,453
thousand
shares
Diluted, 127,366 211,720
thousand
shares
Refer to accompanying notes to Unaudited Pro Forma Financial Information
Notes to Unaudited Pro Forma Financial Information
Tabular amounts in millions of euros, unless noted otherwise.
1) Alignment of Lemminkäinen’s financial information with YIT’s
presentation
Certain reclassifications have been made to align Lemminkäinen’s historical
financial information with YIT’s financial statement presentation. Upon
completion of the Merger, YIT will conduct a detailed review of Lemminkäinen’s
financial statement presentation. As a result of that review, YIT may identify
additional presentation differences between the two companies that, when
conformed, could have further impact on the presentation of the Combined
Company’s financial information.
The following reclassifications have been made to align Lemminkäinen’s
historical statement of income for the six months ended June 30, 2017 with YIT’s
statement of income presentation:
For the six months
ended June 30, 2017
(EUR in Lemminkäinen historical Reclassifications Note
Lemminkäinen
millions)
reclassified
Revenue (Net 706.3 14.2 (i)
720.5
sales)
Use of -526.9 526.9 (ii)
-
materials and
services
Materials and - -194.1 (ii)
-194.1
supplies
External - -332.8 (ii)
-332.8
services
Other -65.8 -14.7 (i),(iv)
-80.4
operating
expenses
Impairment -0.2 0.2 (iii)
-
Depreciation -12.6 12.6 (iii)
-
and
amortisation
Depreciation, - -12.8 (iii)
-12.8
amortisation
and
impairment
Operating -17.0 -0.4 (iv)
-17.4
profit
Financial -8.4 0.4 (iv)
-7.9
income and
expenses,
total
(i) Reclassification of EUR 14.2 million from Revenue to Other operating
expenses.
(ii) Reclassification of EUR 526.9 million from Use of materials and services
to Materials and supplies (EUR 194.1 million) and External services (EUR 332.8
million).
(iii) Reclassification of EUR 0.2 million from Impairment and EUR 12.6 million
from Depreciation and amortisation to Depreciation, amortisation and impairment
(EUR 12.8 million).
(iv) Reclassification of EUR 0.4 million from Financial income and expenses,
total to Other operating expenses.
The following reclassifications have been made to align Lemminkäinen’s
historical statement of income for the year ended December 31, 2016 with YIT’s
statement of income presentation:
For the year ended December 31,
2016
(EUR in Lemminkäinenhistorical(audited) Reclassifications Note
Lemminkäinen
millions)
reclassified
Revenue (Net 1,682.7 37.0 (i)
1,719.7
sales)
Use of -1,158.9 1,158.9 (ii)
-
materials and
services
Materials and - -426.2 (ii)
-426.2
supplies
External - -732.8 (ii)
-732.8
services
Other -132.6 -38.3 (i),(iv)
-170.9
operating
expenses
Impairment -0.2 0.2 (iii)
-
Depreciation -34.3 34.3 (iii)
-
and
amortisation
Depreciation, - -34.5 (iii)
-34.5
amortisation
and
impairment
Operating 67.6 -1.3 (iv)
66.3
profit
Financial -18.4 1.3 (iv)
-17.0
income and
expenses,
total
(i) Reclassification of EUR 37.0 million from Revenue to Other operating
expenses.
(ii) Reclassification of EUR 1,158.9 million from Use of materials and
services to Materials and supplies (EUR 426.2 million) and External services
(EUR 732.8 million).
(iii) Reclassification of EUR 0.2 million from Impairment and EUR 34.3 million
from Depreciation and amortisation to Depreciation, amortisation and impairment
(EUR 34.5 million).
(iv) Reclassification of EUR 1.3 million from Financial income and expenses,
total to Other operating expenses.
2) The Merger
The following pro forma adjustments give effect to the Merger on the unaudited
pro forma combined statement of financial position as at June 30, 2017.
(EUR in millions) 2a) Preliminary 2b) 2c) New Merger
purchase price Transaction Financing in
allocation costs Agreements total
Assets
Non-current
assets
Property, plant 18.8 - - 18.8
and equipment
Goodwill 327.9 - - 327.9
Other intangible 51.1 - - 51.1
assets
Investments in - - - -
associated
companies
and joint
ventures
Available-for - - - -
-sale financial
assets
Interests-bearing - - - -
receivables
Other receivables - - 1.1 1.1
Deferred tax -24.6 0.3 - -24.3
assets
Total non-current 373.2 0.3 1.1 374.5
assets
Current assets
Inventories 29.3 - - 29.3
Trade and other -1.2 - -0.7 -1.9
receivables
Income tax - - - -
receivables
Cash and cash - -10.4 -4.0 -14.5
equivalents
Total current 28.1 -10.4 -4.7 12.9
assets
Total assets 401.3 -10.2 -3.6 387.5
Equity and
liabilities
Total equity 308.7(¹) -10.2 -3.6 294.9
attributable to
the
equity holders of
the parent
company
Non-controlling - - - -
interest
Total equity 308.7 -10.2 -3.6 294.9
Non-current
liabilities
Deferred tax 10.8 - - 10.8
liabilities
Pension - - - -
obligations
Provisions 33.3 - - 33.3
Borrowings 7.5 - - 7.5
Other - - - -
liabilities
Total non-current 51.6 - - 51.6
liabilities
Current
liabilities
Advances - - - -
received
Trade and other 3.3 - - 3.3
payables
Income tax - - - -
liabilities
Provisions - - - -
Borrowings 37.7 - - 37.7
Total current 41.0 - - 41.0
liabilities
Total 92.6 - - 92.6
liabilities
Total equity and 401.3 -10.2 -3.6 387.5
liabilities
(¹) The following illustrates the pro forma adjustments of the preliminary
purchase price allocation affecting the pro forma equity attributable to owners
of the parent:
(EUR in Reclassification Elimination of Preliminary 2a)
millions) of the hybrid Lemminkäinen’s estimate of the Preliminary
bond to current equity fair purchase
borrowings value of the price
(2a)(viii) purchase allocation
consideration in total
Share capital - -34.0 0.5 -33.5
Hybrid bond -34.8 - - -34.8
Other reserves - -225.4 602.5 377.1
and retained
earnings
Total equity -34.8 -259.5 603.0 308.7
attributable to
the
equity holders
of the parent
company
2 a) Preliminary purchase price allocation to acquired assets and assumed
liabilities
The Merger will be accounted using the acquisition method of accounting where
YIT acquires Lemminkäinen. Under the acquisition method of accounting, purchase
consideration is allocated to assets acquired and liabilities assumed based on
their estimated fair values as of the acquisition date. The excess of the
estimated preliminary purchase consideration over the estimated fair value of
the identifiable net assets acquired will be allocated to goodwill in this
Unaudited Pro Forma Financial Information.
Preliminary estimate of the fair value of the purchase consideration
The preliminary estimate of the purchase consideration transferred to acquire
Lemminkäinen as if the acquisition of Lemminkäinen occurred on June 30, 2017:
Preliminary estimate of purchase consideration Note EUR in million
Preliminary fair value estimate of YIT equity issued as (i) 601.8
the Merger Consideration Shares
Estimated fair value of the long-term incentive program (ii) 1.2
of Lemminkäinen allocated to pre-combination services
Total 603.0
The preliminary fair value estimate of purchase consideration has been
calculated based on the following assumptions:
(i) The purchase consideration is determined based on the fair value of the
Merger Consideration Shares. The total number of the Merger Consideration Shares
to be issued is expected to be 83,876,431 shares (excluding the treasury shares
held by Lemminkäinen and assuming that none of the shareholders of Lemminkäinen
demands redemption of his or her shares at the EGM of Lemminkäinen deciding on
the Merger) with an aggregate fair value of EUR 601.8 million based on the July
31, 2017 closing price of EUR 7.175 of the YIT share on Nasdaq Helsinki,
corresponding to the preliminary estimate of the purchase consideration used for
the Unaudited Pro Forma Financial Information. Lemminkäinen’s shareholders will
receive as merger consideration 3.6146 Merger Consideration Shares for each
share in Lemminkäinen owned by them. The Merger Consideration settled in shares
will be recorded in non-restricted equity of YIT with the exception of the
increase in share capital amounting to EUR 0.5 million.
(ii) Following the completion of the Merger, the unsettled share-based
rewards earned under Lemminkäinen’s long-term incentive plan for earning periods
2016 and 2017 shall be settled in YIT’s shares using the exchange ratio of
3.6146 set out in the Merger Plan and otherwise in accordance with the terms of
the incentive plan. The long-term incentive plan for earning periods 2016 and
2017 will have ongoing service and performance obligations subsequent to the
Merger. The reward is assumed to amount to 430 thousand YIT’s shares and the
fair value of the reward has been calculated using the July 31, 2017 closing
price of EUR 7.175 of the YIT share on Nasdaq Helsinki totalling EUR 3.1
million. The portion of the reward to be settled in YIT’s shares is accounted
for as purchase consideration to the degree to which the rewards have been
earned at the date of the acquisition, totalling EUR 1.2 million. The allocation
of the fair value of long-term incentive program between pre-combination and
post-combination services reflected with in this Unaudited Pro Forma Financial
Information is based on preliminary estimates and, accordingly, the final
purchase consideration determined at the Effective Date will likely result in
differences.
The preliminary purchase consideration reflected in the Unaudited Pro Forma
Financial Information does not purport to represent the actual consideration to
be transferred upon the completion of the Merger. In accordance with IFRS, the
fair value of the Merger Consideration Shares to be issued by YIT corresponding
to the purchase consideration transferred in the acquisition will be measured on
the Effective Date at the then-current market price (fair value) of the YIT
share. This requirement will likely result in a purchase consideration different
from the amount used in the Unaudited Pro Forma Financial Information and that
difference may be material. A change of five percent per share in the YIT share
price would increase or decrease the purchase consideration expected to be
transferred by approximately EUR 30.1 million, which would be reflected in the
Unaudited Pro Forma Financial Information as an increase or decrease to
goodwill.
Assets acquired and liabilities assumed in connection with the Merger
YIT has made a preliminary allocation of the preliminary purchase consideration,
which is based upon estimates that are believed to be reasonable. As at the date
of the Offering Circular, YIT has not completed all of the detailed valuation
studies necessary to arrive at the required estimates of fair value for all of
Lemminkäinen’s assets to be acquired and liabilities to be assumed. Upon the
completion of the Merger, YIT will conduct a detailed valuation of all assets
and liabilities as of the acquisition date at which point the fair value of
acquired assets and assumed liabilities may materially differ from the amounts
presented herein. Lemminkäinen’s unaudited consolidated statement of financial
position information as at June 30, 2017 was used in the preliminary purchase
price allocation presented below and accordingly, the final fair values will be
determined on the basis of assets acquired and liabilities assumed at the
Effective Date.
The net assets acquired and the preliminary purchase price allocation are
detailed as follows:
(EUR in Lemminkäinen Preliminary Note Acquired assets and
millions) historical purchase price assumed liabilities at
allocation fair value
Property, 139.1 18.8 (i) 157.9
plant and
equipment
Goodwill 53.2 327.9 (ii) 381.1
Other 8.5 51.1 (iii) 59.6
intangible
assets
Investments in 4.1 - 4.1
associated
companies and
joint
ventures
Available-for 1.9 - 1.9
-sale
financial
assets
Interests - - -
-bearing
receivables
Other 0.9 - 0.9
receivables
Deferred tax 33.5 -24.6 (iv) 9.0
assets
Total non 241.2 373.2 614.4
-current
assets
Inventories 392.1 29.3 (v) 421.4
Trade and 327.5 -1.2 (ix) 326.2
other
receivables
Income tax 1.1 - 1.1
receivables
Cash and cash 56.2 - 56.2
equivalents
Total current 776.9 28.1 804.9
assets
Total assets 1,018.0 401.3 1,419.3
Deferred tax 9.8 10.8 (vi) 20.6
liabilities
Pension - - -
obligations
Provisions 19.9 33.3 (vii) 53.2
Borrowings 119.2 7.5 (viii) 126.7
Other 0.1 - 0.1
liabilities
Total non 149.0 51.6 200.6
-current
liabilities
Advances 170.0 - 170.0
received
Trade and 297.7 3.3 (ix) 301.0
other payables
Income tax 1.3 - 1.3
liabilities
Provisions 11.9 - 11.9
Borrowings 93.8 37.7 (viii) 131.5
Total current 574.7 41.0 615.6
liabilities
Total 723.7 92.6 816.3
liabilities
Net assets 221.9
acquired
(excluding
goodwill)
Non 0.0
-controlling
interest
Preliminary 603.0
estimate of
purchase
consideration
Goodwill 381.1
Fair valuation of assets and liabilities
(i) A preliminary fair value adjustment of EUR 18.8 million has been
recorded to Property, plant and equipment in the unaudited pro forma combined
statement of financial position as at June 30, 2017 to reflect the fair value of
acquired assets of EUR 157.9 million. The fair value adjustment mainly relates
to industrial properties in Finland, asphalt plants and paving equipment and
mineral aggregate deposits.
Based on the preliminary valuation, additional depreciation expense of EUR 0.8
million has been recorded to the unaudited pro forma combined statement of
income for the six months ended June 30, 2017 and EUR 1.6 million for the year
ended December 31, 2016. The remaining depreciation period for the acquired
Property, plant and equipment adjusted for fair value is estimated to be between
9-25 years.
(ii) The goodwill recognized in the unaudited pro forma combined statement of
financial position as at June 30, 2017 represents the excess of the preliminary
purchase consideration transferred over the preliminary fair value of
identifiable net assets acquired. The preliminary goodwill amount of EUR 381.1
million arising in the combination is mainly attributable to synergies and
assembled workforce. YIT expects that the goodwill will not be deductible for
tax purposes.
For pro forma presentation purposes, the difference of EUR 327.9 million between
Lemminkäinen’s existing goodwill of EUR 53.2 million and the preliminary
goodwill amount arising in the combination of EUR 381.1 million is adjusted in
the unaudited pro forma combined statement of financial position.
(iii) The preliminary fair values of other intangible assets have been
determined primarily through the use of the “income approach” which requires an
estimate or forecast of expected future cash flows. Either the multi-period
excess earnings method or the relief-from-royalty method has been used as the
income based valuation method. The following table sets forth the preliminary
fair value adjustments of the identifiable other intangible assets, estimated
average useful lives representing the amortisation periods and estimated
amortisation for the periods presented in this Unaudited Pro Forma Financial
Information:
Estimated
amortisation
(EUR in Fair value Useful For the six months For the year ended
millions) adjustment life ended June 30, 2017 December 31, 2016
Customer 21.4 5-15 1.3 2.6
related years
intangibles
Marketing 16.1 15 0.5 1.1
related years
intangibles
Contract based 13.6 2 years 3.4 6.8
intangibles
Total 51.1 5.3 10.5
Customer related intangibles represent the fair value of the customer agreements
and underlying relationships with Lemminkäinen’s customers. Based on the
preliminary valuation, amortisation expense of EUR 1.3 million has been recorded
to the unaudited pro forma combined statement of income for the six months ended
June 30, 2017 and EUR 2.6 million for the year ended December 31, 2016.
Marketing related intangibles represents the fair value of Lemminkäinen’s brand
portfolio. Based on the preliminary valuation, amortisation expense of EUR 0.5
million has been recorded to the unaudited pro forma combined statement of
income for the six months ended June 30, 2017 and EUR 1.1 million for the year
ended December 31, 2016.
Contract based intangibles represents the fair value Lemminkäinen’s order
backlog. Based on the preliminary valuation, amortisation expense of EUR 3.4
million has been recorded to the unaudited pro forma combined statement of
income for the six months ended June 30, 2017 and EUR 6.8 million for the year
ended December 31, 2016.
(iv) The adjustment of EUR 24.6 million reflects the recognition of the non
-current deferred tax asset on the tax loss carryforwards to the amount that
there is sufficient taxable temporary differences or there is convincing
evidence that the tax loss carryforwards can be utilized in the Combined
Company. The tax loss carryforwards in the parent company in Finland will not be
available under currently enacted tax laws applying to the change of control as
of and at June 30, 2017.
(v) A preliminary fair value adjustment of EUR 29.3 million has been recorded
to inventories in the unaudited pro forma combined statement of financial
position as at June 30, 2017 to reflect the preliminary fair value of acquired
inventories of EUR 421.4 million. YIT expects that the acquired inventory will
turn-over within 24 months and accordingly, the fair value adjustment of EUR
14.7 million has been recorded to the unaudited pro forma combined statement of
income as an expense for the year ended December 31, 2016 and EUR 7.3 million
for the six months ended June 30, 2017. This adjustment will not have a
continuing impact on the Combined Company’s results or financial position.
(vi) Represents the estimated non-current deferred tax liability related to
the fair value adjustments reflected in the unaudited pro forma combined
statement of financial position (excluding adjustments related to goodwill,
which is assumed to be non-deductible). The deferred tax assets and liabilities
related to fair value adjustments have been offset as they relate to income
taxes on the same jurisdiction and a right to set off tax assets against tax
liabilities exists. The resulting impact increases deferred tax liabilities by
EUR 10.8 million. Deferred income tax impacts for non-financial assets were
calculated based on an assumed blended tax rate of 20.4 percent and for assumed
financial liabilities based on nominal tax rate of 20.0 percent representing the
tax rate in Finland. The tax rates are based on preliminary assumptions related
to the underlying jurisdictions that the income or expense will be recorded. The
effective tax rate of the Combined Company could be significantly different
depending on the post-acquisition activities, including cash needs, geographical
mix of net income and tax planning strategies
(vii) A preliminary adjustment of EUR 33.3 million has been recognised to
assumed contingent liabilities related to legal proceedings. The adjustment
reflects the fair value of the assumed contingencies taking into account a
reasonable risk premium for such contingencies. The adjustment is based on
preliminary information and the fair value for the assumed contingent
liabilities at the Effective Date might differ when additional information is
available. This adjustment will not have a continuing impact on the Combined
Company’s results once the contingencies have been resolved or settled.
(viii) YIT assumes Lemminkäinen’s hybrid bond of EUR 34.8 million in the Merger
which Lemminkäinen has classified as equity at consolidation. The bybrid bond
has been reclassified from equity to current borrowings since,from the
acquirer’s perspective, the bybrid bond is not an acquired asset but is
considered as an assumed liability. Further, it has been fair valued at the make
whole price of EUR 37.7 million for the Unaudited Pro Forma Financial
Information purposes, as defined in the terms and conditions of the hybrid bond,
representing the settlement price for the bond as at June 30, 2017.
A fair value adjustment of EUR 7.5 million has been recognized for the
Lemminkäinen’s Bond included in Lemminkäinen’s interest-bearing liabilities. The
carrying value of the Notes amounts to EUR 107.3 million after the adjustment
representing the ask price of the Lemminkäinen’s Bond as at June 30, 2017.
(ix) This adjustment consist of elimination of transactions between YIT and
Lemminkäinen, elimination of capitalised expenses related to Lemminkäinen’s
financing arrangements expiring in the Merger and liabilities related to
employee benefits that are contingent on the Merger.
Adjustment includes the elimination of Trade and other receivables and Trade and
other payables balances between YIT and Lemminkäinen amounting to EUR 0.3
million as at June 30, 2017. The Revenue of EUR 2.3 million and corresponding
the Materials and supplies have been eliminated from the unaudited pro forma
combined statement of income for the six months ended June 30, 2017 and,
respectively, EUR 11.0 million from the unaudited pro forma combined statement
of income for the year ended December 31, 2016.
The capitalised transaction costs of EUR 1.0 million related to Lemminkäinen’s
current revolving credit facility has been eliminated from the Trade and other
receivables on the unaudited pro forma combined statement of financial position
as at June 30, 2017.as this current revolving credit facility is intended to be
terminated on the Effective Date.
Employee benefit liabilities related adjustments to trade and other payables on
the unaudited pro forma combined statement of financial position as at June 30,
2017 amount to EUR 3.5 million, which relate to Merger related bonuses and to
the settlement of a portion of the Lemminkäinen long-term incentive plan’s 2016
earnings period, reflecting the aggregate amount of assumed liabilities at the
acquisition date.
Following the completion of the Merger, the unsettled share-based rewards earned
under Lemminkäinen’s long-term incentive plan for earning periods 2016 and 2017
shall be settled in YIT’s shares as set out in the Merger Plan and otherwise in
accordance with the terms of the long-term incentive plan. The long-term
incentive plan for earning periods 2016 and 2017 will have ongoing service and
performance obligations subsequent to the Merger. The reward is assumed to
amount to 430 thousand YIT’s shares and the fair value of the reward has been
calculated using the July 31, 2017 closing price of EUR 7.175 of the YIT share
on Nasdaq Helsinki. The portion of the fair value reflecting post-combination
services will be recorded as personnel expenses over the remaining vesting
period of the awards. Accordingly, an incremental expense of EUR 5.0 thousand
has been recorded to the unaudited pro forma combined statement of income as
personnel expenses for the year ended December 31, 2016 and a reduction of
personnel expenses of EUR 0.3 million for the six months ended June 30, 2017.
The following tables set forth the impact of the acquisition and the preliminary
purchase price allocation that has been reflected to the unaudited pro forma
combined statement of income for the six months ended June 30, 2017 and for the
year ended December 31, 2016:
For the six
months
ended June
30, 2017
(EUR in Additional Additional Inventory Elimination Long-term
Total
millions) depreciation amortisation fair of incentives
of of value transaction
tangible intangible adjustment between YIT
assets assets and
Lemminkäinen
Revenue - - - -2.3 -
-2.3
Materials and - - -7.3 2.3 -
-5.0
supplies
Personnel - - - - 0.3
0.3
expenses
Depreciation, -0.8 -5.3 - - -
-6.0
amortisation
and
impairment
Operating -0.8 -5.3 -7.3 - 0.3
-13.1
profit
Result before -0.8 -5.3 -7.3 - 0.3
-13.1
taxes
Income taxes 0.2 1.1 1.5 - -0.1
2.7
Result for -0.6 -4.2 -5.8 - 0.2
-10.4
the period
For the year
ended
December 31,
2016
(EUR in Additional Additional Inventory Elimination Long
-term Total
millions) depreciation amortisation fair of
incentives
of of value transactions
tangible intangible adjustment between YIT
assets assets and
Lemminkäinen
Revenue - - - -11.0
- -11.0
Materials and - - -14.7 11.0
- -3.6
supplies
Personnel - - - -
-0.0 -0.0
expenses
Depreciation, -1.6 -10.5 - -
- -12.1
amortisation
and
impairment
Operating -1.6 -10.5 -14.7 -
-0.0 -26.8
profit
Result before -1.6 -10.5 -14.7 -
-0.0 -26.8
taxes
Income taxes 0.3 2.1 3.0 -
0.0 5.5
Result for -1.2 -8.4 -11.7 -
-0.0 -21.3
the
period
2 b) Transaction costs
The total costs of EUR 15.0 million expected to be incurred by YIT and
Lemminkäinen in connection with the Merger primarily comprise financial, legal
and advisory costs as well as costs related to the bond consent solicitation
processes. The estimated transaction costs of EUR 12.0 million has been recorded
in other operating expenses in the unaudited pro forma combined statement of
income for the year ended December 31, 2016. The total amount of transaction
costs already incurred of EUR 2.9 million have been recorded in YIT’s and
Lemminkäinen’s consolidated statements of income for the six months ended June
30, 2017, and have been eliminated from Other operating expenses for that
period. This adjustment is not expected to have a continuing impact on the
Combined Company’s results or financial position.
The estimated costs for issuance of the Merger Consideration Shares amount to
EUR 1.1 million (net of taxes) and have been deducted from equity in the
unaudited pro forma combined statement of financial position as at June 30,
2017. The tax effect for the adjustment of EUR 0.3 million is included in the
deferred tax assets in the unaudited pro forma combined statement of financial
position.
In the unaudited pro forma combined statement of financial position, the unpaid
portion of the transaction costs that are not recorded as accounts payable as at
June 30, 2017 amounting to EUR 10.4 million has been deducted from cash and cash
equivalents.
Further, the total transaction costs includes the estimated costs for the
consent fees of EUR 1.7 million for the YIT’s and Lemminkäinen’s Bonds
recognised in the Financial income and expenses in the unaudited pro forma
combined statement of income for the year ended December 31, 2016. This
adjustment will not have a continuing impact on the Combined Company’s results.
2 c) New Financing Agreements
YIT has received a financing commitment for the Merger from Nordea and Danske
Bank. The New Financing Agreements will consist of a EUR 240 million bridge
financing agreement and a EUR 300 million revolving credit facility, which will
become available to the Combined Company as of the Effective Date. In accordance
with these financing commitments, YIT and the banks signed on August 24, 2017 a
bridge financing agreement and a revolving credit facility agreement. In the
bridge financing agreement, Nordea and Danske Bank will act as lead arrangers
and arrangers, and Danske Bank as agent. In the revolving credit facility
Nordea, Danske Bank, OP Corporate Bank, Handelsbanken, SEB, Swedbank will act as
lead arrangers and arrangers and LähiTapiola as arranger and Danske Bank as
agent. The purpose of the bridge financing is to act as back-up facility to
refinance certain existing debts of YIT and Lemminkäinen, if so required, and
finance the redemption of the shares of Lemminkäinen shareholders who oppose the
Merger. Accordingly, the Unaudited Pro Forma Financial Information reflects the
effect of the facility and commitment fees related to this financing commitments
that the Combined Company will incur during the periods presented.
For pro forma purposes, the financial expenses have been adjusted by EUR 1.5
million for the six months ended June 30, 2017 and EUR 2.8 million for the year
ended December 31, 2016 to reflect the amortisation of the fair value
adjustments recorded on Lemminkäinen’s Bond and hybrid bond to the respective
periods. The adjustment to financial expenses includes the interest expense of
the hybrid bond that has been transferred from equity to financial expenses
after taking into consideration the fair value adjustment, and the impact is EUR
-0.4 million to the unaudited pro forma combined income statement for the six
months ended June 30, 2017 and EUR -0.9 million for the year ended December 31,
2016. As a result, the pro forma combined income statements reflect the
effective interest cost on the assumed liabilities calculated on their
acquisition date fair values over the estimated life of the borrowings. The
effective interest rates used for pro forma purposes vary from 2.3 percent to
3.5 percent depending on the underlying loan.
The following table sets forth the impact of the Merger including the New
Financing Agreements to financial costs in the unaudited pro forma combined
statement of income for the six months ended June 30, 2017:
(EUR in Transaction Transaction Interest Costs Total
millions) costs costs adjustments of related adjustment
related related Lemminkäinen’s to the
to bridge to Bond and bonds’
financing revolving hybrid bond consent
agreement credit solicitation
facility processes
Financial - 0.6 1.5 - 2.1
income
and
expenses,
total
The following table sets forth the impact of the Merger including the New
Financing Agreements to financial costs in the unaudited pro forma combined
statement of income for the year ended December 31, 2016:
(EUR in Transaction Transaction Interest Costs Total
millions) costs costs adjustments of related adjustment
related related Lemminkäinen’s to the
to bridge to Bond and bonds’
financing revolving hybrid bond consent
agreement credit solicitation
facility processes
Financial -1.0 2.8 2.8 -1.7 2.9
income
and
expenses,
total
Transaction costs related to revolving credit facility and the interest
adjustments of Lemminkäinen’s Bond and hybrid bond have a continuing impact on
the Combined Company’s financial expenses.
Additional pro forma information
Earnings per share
Pro forma basic earnings per share is calculated by dividing the pro forma net
result attributable to equity holders of the parent by the pro forma weighted
average number of shares outstanding as adjusted for the Merger.
Pro forma diluted earnings per share is calculated by adding the historical
dilution effect to the calculated pro forma weighted average number of shares.
The Merger is assumed to have dilution effect regarding Lemminkäinen’s long-term
incentive program.
The following table sets forth the pro forma earnings per share attributable to
parent company’s shareholders for the periods indicated:
For the six For the year ended
months December 31, 2016
ended June
30, 2017
Pro forma result attributable to parent -12.6 2.4
company's shareholders, EUR million
Weighted average number of shares 125,642,920 125,577,058
outstanding – historical
Merger Consideration Shares to be issued to 83,876,431 83,876,431
Lemminkäinen's shareholders
Pro forma weighted average number of shares 209,519,351 209,453,489
outstanding – basic
Dilution effect – historical 1,905,680 1,788,750
Dilution effect from the Lemminkäinen's long 478,179 478,179
-term incentive program
Pro forma weighted average number of shares 211,903,210 211,720,418
outstanding – diluted
Pro forma earnings per share attributable to -0.06 0.01
parent company's shareholders – basic, EUR
Pro forma earnings per share attributable to -0.06 0.01
parent company's shareholders – diluted, EUR
Pro forma adjusted operating profit and pro forma adjusted operating profit
excluding PPA
The following tables set forth a reconciliation of the Combined Company’s pro
forma adjusted operating profit and pro forma adjusted operating profit
excluding PPA to pro forma reported operating profit for the six months ended
June 30, 2017 and for the year ended December 31, 2016:
For the
six months
ended June
30, 2017
(EUR in millions) YIT Lemminkäinen Merger Combined
historical reclassified (Note Company pro
(Note 1) 2) forma
Operating profit 25.8 -17.4 -10.2 -1.8
(IFRS)
Items affecting 1.1 5.1 - 6.2
comparability
reported
historically(1)
Transaction costs - - -2.9 -2.9
incurred(2)
Adjusted operating 26.9 -12.3 -13.1 1.6
profit(2)(3)
Estimated inventory - - 7.3 7.3
fair value
adjustment(4)
Estimated - - 6.0 6.0
depreciation and
amortisation
expenses from fair
value
adjustments(4)
Adjusted operating 26.9 -12.3 0.3 14.9
profit excluding
PPA(4)
For the
year ended
December
31, 2016
(EUR in millions) YIT Lemminkäinen Merger Combined
historical reclassified (Note Company pro
(Note 1) 2) forma
Operating profit 17.7 66.3 -38.7 45.3
(IFRS)
Items affecting 27.0 -22.5 - 4.5
comparability
reported
historically(1)
Estimated - - 12.0 12.0
transaction
costs(2)
Adjusted operating 44.7 43.8 -26.8 61.7
profit(2)(3)
Estimated inventory - - 14.7 14.7
fair value
adjustment(4)
Estimated - - 12.1 12.1
depreciation and
amortisation
expenses from fair
value
adjustments(4)
Adjusted operating 44.7 43.8 -0.0 88.4
profit excluding
PPA(4)
(1) Represents items affecting comparability historically reported by YIT
and Lemminkäinen based on YIT’s definitions of the items affecting comparability
and which are set forth in the following table:
(EUR in For the six months For the year ended December 31, 2016
millions) ended June 30,
2017
YIT’s items
affecting
comparability
Impairment of - 18.0
land plots
Project - 6.6
expense
provision
related to
plots in
Moscow area
Impairment of - 2.4
goodwill
Transaction 1.1 -
costs related
to planned
Merger
Total items 1.1 27.0
affecting
comparability
Lemminkäinen’s
items
affecting
comparability
Transaction 1.8 -
costs related
to planned
Merger
Compensation 3.4 -
related to the
Helsinki Court
of Appeal's
decision
regarding
breach of the
Finnish
environmental
protection law
Reimbursements - -19.4
related to the
Helsinki Court
of Appeal's
decisions
regarding the
asphalt cartel
Lowered - -8.0
provisions
related to the
Helsinki Court
of Appeal's
decisions
regarding the
asphalt cartel
Write-downs - 4.9
related to non
-core
businesses
Total items 5.1 -22.5
affecting
comparability
(2) Pro forma adjusted operating profit excludes pro forma adjustments
that do not have a continuing impact on the Combined Company’s results and which
are deemed to be material items outside ordinary course of business comprising
transaction costs related to the Merger.
(3) YIT defines adjusted operating profit as operating profit excluding
material items outside ordinary course of business (for more detailed
description see “Presentation of Financial Information – Alternative Performance
Measures”).
(4) Adjusted operating profit excluding PPA excludes, in addition to the
items excluded in adjusted operating profit, cost impacts of the fair value
adjustments relating to purchase price allocation, such as fair value
adjustments on acquired inventory, depreciation of fair value adjustments on
acquired property, plant and equipment and amortisation of fair value
adjustments on acquired intangible assets, which are deemed to be material pro
forma adjustments. The business combination accounting under the provisions of
IFRS 3 is referred to as purchase price allocation (“PPA”).
Pro forma interest bearing net debt, equity ratio and gearing
The following tables set forth the pro forma net debt, equity ratio and gearing
of the Combined Company as at June 30, 2017, including all the pro forma
adjustments impacting the net borrowings and the total equity of the Combined
Company:
Pro forma
net debt as
at June 30,
2017
(EUR in millions, unless YIT Lemminkäinen Merger(Note Combined
otherwise indicated) historical historical 2) Company pro
forma
Assets
Interest-bearing 39.9 - - 39.9
receivables
Cash and cash equivalents 35.3 56.2 -14.5 77.1
Liabilities
Non-current borrowings 268.5 119.2 7.5 395.2
Current borrowings 380.0 93.8 37.7 511.5
Interest bearing net debt 573.3 156.8 59.7 789.7
at the end of the period
Pro forma
equity ratio
as at June
30, 2017
(EUR in millions, YIT historical Lemminkäinen Merger(Note Combined
unless otherwise historical 2) Company pro
indicated) forma
Total equity 533.4 294.3 294.9 1,122.6
Advances received 476.5 170.0 - 646.4
Total assets 2,214.5 1,018.0 387.5 3,620.0
Equity ratio at the 30.7 % 34.7 % 37.8 %
end of the period, %
Pro forma
gearing as
at June 30,
2017
(EUR in millions) YIT historical Lemminkäinen Merger(Note Combined
historical 2) Company pro
forma
Interest bearing 648.5 213.0 45.2 906.7
debt
Cash and cash 35.3 56.2 -14.5 77.1
equivalents
Total equity 533.4 294.3 294.9 1,122.6
Gearing at the 115.0 % 53.3 % 73.9 %
end of the
period, %
ANNEX 2: Additional details on financing of the combined company
YIT has received a financing commitment for the Merger from Nordea and Danske
Bank. The new financing to be arranged in connection with the Merger will
consist of a EUR 240 million bridge financing agreement and a EUR 300 million
revolving credit facility (“New Financing Agreements”), which will become
available to the Combined Company as of the Effective Date. In accordance with
these financing commitments, YIT and the banks signed on August 24, 2017 a
bridge financing agreement and a revolving credit facility agreement. In the
bridge financing agreement, Nordea and Danske Bank will act as lead arrangers
and arrangers, and Danske Bank as agent. In the revolving credit facility
Nordea, Danske Bank, OP Corporate Bank, Handelsbanken, SEB and Swedbank will act
as lead arrangers and arrangers and LähiTapiola as arranger and Danske Bank as
agent. In addition, YIT and Lemminkäinen intend to agree to amendments to the
terms and conditions of certain existing debts and to arrange the appropriate
waivers for the terms.
In accordance with the bridge financing agreement, the Combined Company will be
granted a loan of EUR 240 million that will become available to the Combined
Company on the condition that the Merger has been executed and certain other
conventional preconditions have been fulfilled. As a precaution arrangement, the
purpose of the bridge financing is, if needed, to (directly or indirectly)
refinance certain existing debts of YIT and Lemminkäinen and finance the
redemption of the shares of Lemminkäinen shareholders who oppose the Merger.
Lemminkäinen’s EUR 35.2 million hybrid bond, as well as certain bilateral bank
loans and other bank financing instruments can be refinanced with the bridge
loans, if needed. The bridge financing will mature for repayment after 12 months
of the signing of the agreement, although it includes an option for a six-month
extension. Provided that certain usual preconditions are met, the bridge
financing will become available as of the Effective Date and must be drawn down
by April 30, 2018 or, if later, within three months of the Effective Date. If
the Merger has not been executed by March 31, 2018, the bridge financing will be
cancelled immediately and in full. The interest rate paid on the loans drawn
down under the bridge financing agreement consists of the sum of the applicable
margin and the Euribor rate.
The new revolving credit facility will become available on the condition that
the Merger has been executed and certain other conventional preconditions have
been fulfilled. The new revolving credit facility can be used for refinancing
YIT’s existing revolving credit facility and meeting the general financing needs
of the Combined Company’s group. The new revolving credit facility replaces
YIT's and Lemminkäinen's existing revolving credit facilities of EUR 200
million. The revolving credit facility will mature for repayment after 3 years
of the signing of the agreement, although it includes an option for a one-year
extension. The interest rate paid on the loans drawn down under the revolving
credit facility agreement consists of the sum of the applicable margin and the
Euribor rate. The margin charged on the revolving credit facility will be
determined on the basis of the company’s indebtedness (the ratio of net debt to
EBITDA). If the Merger has not been executed by March 31, 2018, the financing
under the revolving credit facility will be cancelled immediately and in full.
The bridge financing agreement and the revolving credit facility agreement
include the usual terms and conditions concerning early repayment and
cancellation. The bridge financing agreement also includes the requirement that
the Combined Company must use all funds obtained from long-term bank loans or
issues on the capital markets (excluding commercial papers) for the early
repayment of the bridge loan. The bridge financing agreement and the revolving
credit facility agreement include the usual financial covenants, business
covenants, insurances and acceleration clauses (with certain exceptions and
conditions). The loans drawn down under the bridge financing agreement and the
revolving credit facility agreement are unsecured and non-guaranteed.
Certain other financing arrangements
In June 2017, YIT initiated a consent solicitation process concerning its
outstanding EUR 100,000,000 and EUR 50,000,000 fixed-rate senior unsecured bonds
maturing in 2020 and 2021 (“YIT's Bonds”) in order to obtain the consent of the
holders of YIT's Bonds for the Merger as well as an exemption concerning a
potential breach of the commitments and obligations based on the Bonds as a
result of the Merger. In connection with the consent solicitation process, the
holders of the Bonds have also been requested to confirm that they have waived
their right to oppose the Merger pursuant to Chapter 16, section 6 of the
Finnish Companies Act. All holders of YIT's Bonds provided the solicited
consents and exemptions that came into effect in July 2017. The decision became
final and binding on the holders of the YIT's Bonds if it was approved by
holders of the YIT's Bonds who represented at least 50 per cent of the adjusted
nominal capital of the units held by the holders of the YIT's Bonds who
participated in the decision-making process. The holders of the Bonds who voted
in favour of the proposal were entitled to a total fee of 0.10 per cent of the
Bonds’ nominal capital. YIT has paid a total of EUR 150,000 in fees to the
holders of the YIT's Bonds.
In August 2017, Lemminkäinen initiated a consent solicitation process concerning
its outstanding EUR 100,000,000 fixed-rate unsecured bond maturing in 2019
(“Lemminkäinen’s Bond”) in order to obtain the consent of the holders of
Lemminkäinen’s Bond for the Merger and for the change of the issuer of
Lemminkäinen’s Bond, a waiver concerning a potential breach of the commitments
and obligations of the terms and conditions of Lemminkäinen’s Bond as a result
of the Merger, as well as decisions to amend the terms and conditions of
Lemminkäinen’s Bond to take into account for the size and structure of the
Combined Company following the completion of the Merger. In connection with the
consent solicitation process, the holders of Lemminkäinen’s Bond were also
requested to waive their right to oppose the Merger pursuant to Chapter 16,
Section 6 of the Finnish Companies Act. Those holders of Lemminkäinen’s Bond who
voted on the proposal (either for or against) are entitled to a fee amounting to
either 0.1 or 0.6 per cent of the principal amout of Lemminkäinen’s Bond held
and voted for by each holder. The higher fee will be paid to those holders of
Lemminkäinen’s Bond who delivered a voting instruction in favour of the proposal
by the earlier deadline set in the consent solicitation memorandum (in both
cases, the payment of the fee is contingent on the approval and entry into force
of the proposal and the execution of the Merger). The maximum amount of fees to
be paid is thus EUR 600,000 provided that all aforementioned preconditions for
payments of the fee are met. A meeting of the holders of Lemminkäinen’s Bond was
held on August 18, 2017 in which the holders of Lemminkäinen’s Bond resolved to
approve the proposal relating to granting consents and waivers and took
decisions to amend the terms and conditions of the Notes. In order for the
decisions to pass at the meeting of the holders of Lemminkäinen’s Bond the
proposals were to be approved by bondholders who represented at least 75 per
cent of the adjusted nominal amount of Lemminkäinen’s Bond represented at the
meeting. As the holders of Lemminkäinen’s Bond provided the solicited consents
and waivers and agreed to the requested changes, Lemminkäinen’s Bond remains
valid and will be transferred to the Combined Company’s liabilities on the
Effective Date. The consents and waivers became effective immediately upon
approval and the amendments will become effective on the Effective Date.
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